Schwab YieldPlus Fund: July 2008 Archives

Calculating Your Schwab YieldPlus Fund Damages

By
Sara
on July 29, 2008 1:02 PM |

            Prior to contacting the Charles Schwab Client Advocacy Team to discuss your Schwab YieldPlus Fund damages, we are recommending to our potential clients that they prepare a Profit/Loss spreadsheet that chronologically reflects all of their purchases, dividends (reinvested and/or distributed) and sales of the fund's shares.  Such a spreadsheet should include date of transaction, a description of the transaction (original purchase, dividend reinvestment or distribution, or sale), number of shares, price per share, and the total dollar amount purchased, sold or actually received as a dividend.  This spreadsheet will assist you with your negotiations with Charles Schwab.  In the event that those negotiations are unsuccessful, the spreadsheet is an excellent tool to assist you and your attorney in preparing your claim for arbitration or litigation.

            There are two ways that you can obtain your spreadsheet information.  The more time consuming method would be to take the information directly from each of your monthly statements from the month that you initially purchased the fund through the month that you completely liquidated your holdings.  The simpler and probably quicker method of obtaining this information is to ask your Charles Schwab Financial Consultant to provide to you what is called an "Account History" for your transactions in the Schwab YieldPlus Fund.  We have found that the various Charles Schwab Financial Consultants have been very cooperative in providing this service to their clients to assist them in evaluating their options in pursuing a recovery of their Schwab YieldPlus Fund losses.

            Please feel free to contact Tom Shine at (800) 838-8320 or Chris Vernon at (239) 649-5390 if you wish to consult with either of us about any of the matters discussed above.  We are in the process of signing up additional Schwab YieldPlus clients (generally those clients who lost more than $20,000 in the fund) and expect to be filing a number of new claims in the very near future.




Schwab YieldPlus Fund Settlement Negotiation Issues

By
Sara
on July 11, 2008 4:00 PM |
We have spoken with a number of Schwab YieldPlus Fund shareholders over the past month who are weighing their options with respect to which route they might wish to follow in attempting to recover their losses.  Charles Schwab's Client Advocacy Team appears to be proactively contacting Schwab YieldPlus Fund shareholders and making settlement offers to various individuals.

In evaluating your recovery options, a practical first step would be to contact the Client Advocacy Team to explore whether Charles Schwab might be willing to make a reasonable settlement offer to you and, if so, how much Charles Schwab is willing to offer to you.  The address and telephone number for the Charles Schwab Client Advocacy Team are as follows:

Charles Schwab & Co., Inc.

Client Advocacy Team

101 Montgomery Street

San Francisco, CA  94104-4104

(800) 468-3774

We are actively advising clients on how to best navigate this process to achieve the best results.

Some Schwab YieldPlus Fund shareholders are reporting to us that Charles Schwab Client Advocacy Team representatives are playing audiotapes of conversations that the shareholders had with Charles Schwab financial consultants or traders about the Schwab YieldPlus Fund when the shareholder initially communicated their orders to purchase the fund.  It is our belief and opinion that these recorded conversations will support rather than detract from the strength of your potential claim against Charles Schwab because it is highly unlikely that Charles Schwab's employees were even aware of the level of risk associated with purchasing the fund, much less able to disclose those risks to potential purchasers of the fund.

We are requesting that our prospective clients sign authorization letters instructing Charles Schwab to maintain custody, possession and control of these taped conversations for production during discovery and use in the presentation of our clients' claims in their arbitration hearings.

Another topic that is coming up frequently during settlement discussions between Schwab YieldPlus Fund shareholders and Charles Schwab Advocacy Team members is the issue of what is the proper measure of the shareholder's damages in the fund.  There are a number of valid ways to calculate damages such as "recissionary damages," "well managed account damages" and "net out-of-pocket damages."

Charles Schwab appears to be focusing on its customers' net out-of-pocket damages. These damages are calculated by subtracting the total cost of all Schwab YieldPlus Fund purchases (including reinvestment of monthly dividends back into the fund) from the total net sales proceeds realized by the liquidation of all Schwab YieldPlus Fund shares owned by the shareholder plus the dividends actually received by the shareholder (that is, those dividends that were not reinvested back into the fund).

Charles Schwab appears to be treating dividends reinvested back into the fund as distributions actually received by shareholders rather than money that was used to make additional purchases of the fund.  We believe that, conceptually, Charles Schwab's methodology is incorrect and can result in a significant error in Charles Schwab's favor in the computation of your net out of pocket damages.

Your Charles Schwab monthly statements for the months in which you sold your Schwab YieldPlus Fund shares contains Charles Schwab's calculations of the amounts of your losses resulting from your sale(s) of Schwab YieldPlus Fund shares [Realized Gain or Loss on Investments Sold].  You can also access this information for your account from the www.schwab.com/trading/center website.

For investors who reinvested their Schwab YieldPlus Fund dividends back into the fund, Charles Schwab's Realized Gain or Loss on Investments Sold calculation appears to accurately reflect your total net out-of-pocket damages.  For investors who did not reinvest their dividends back into the fund, the total amount of dividends received would reduce their net out-of-pocket damages.

Please feel free to contact me, Tom Shine, at (800) 838-8320 or Chris Vernon at (239) 649-5390 if you wish to consult with either of us about any of the matters discussed above.  We are in the process of signing up additional Schwab YieldPlus clients (generally those clients who lost more than $20,000 in the fund) and expect to be filing a number of new claims in the very near future.

SEC Filing (see page 29)
Schwab Funds Prospectus
CNNMoney

Kimon Daifotis Replaced as Schwab YieldPlus Fund Portfolio Manager

By
Thomas F. Shine
on July 11, 2008 2:25 PM |
Charles Schwab & Co. announced the replacement of Kimon Daifotis, Schwab's YieldPlus portfolio manager, one day after our legal team filed what appears to be the first investor arbitration claim that names Daifotis as an individual respondent.

Our claim, filed on June 12, 2008, asserts that Daifotis, one of Schwab's most prominent fund managers, misrepresented the safety of Schwab's YieldPlus Fund whose total net assets plunged by $12 billion during the eight-month period ending April 1, 2008. Daifotis put increasing portions of the fund's assets into risky mortgage-backed securities and put the fund at risk for a huge failure when the subprime lending credit crisis rocked Wall Street.

On June 13, 2008, Schwab Investments filed an amended prospectus with the Securities and Exchange Commission that discloses that Daifotis, a Senior Vice President and the Chief Investment Officer-Fixed Income for Charles Schwab Investment Management, Inc., had been replaced as the senior portfolio manager responsible for the overall management of the Schwab YieldPlus Fund and four other Schwab fixed income funds. Mr. Daifotis' replacement is Jeffrey Mortimer, CFA, who is also a Senior Vice President and the Chief Investment Officer for CSIM.

SEC Filing (see page 29)
Schwab Funds Prospectus
CNNMoney
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